Finding that rugby regulation was anti-competitive reflects economic reality facing sport, expert says

The Rugby Football Union (RFU)'s appeals panel ruled last week that a rule about clubs' stadium facilities breached competition laws. Trevor Watkins of Pinsent Masons, the law firm behind Out-Law.com, said that financial pressures meant that sporting groups would increasingly share stadiums, and that the ruling reflected that reality.

Watkins said that the decision demonstrated that sports governing bodies must balance conflicting commercial, sporting and legal factors when imposing rules on competition.

In order to play English Premiership rugby clubs must abide by the league's 'primacy of tenure' rules, which require clubs to be able to host home matches on any day and within a broad spectrum of time. Three clubs in the top flight - London Wasps, London Irish and Saracens – are exempt from the requirement.

However, the RFU's appeals panel ruled last week that the rule breached EU and UK competition laws and the Primacy of Tenure rule should fall by the wayside in its current form.

London Welsh Rugby Football Club had challenged the primacy of tenure rule on the basis that the RFU had formed an anti-competitive agreement and abused a position of market dominance as the governing body for rugby in England.

The Club had initially been denied promotion to the Premiership from the Championship because of its failure to meet the primacy of tenure requirements. It arranged to play its home fixtures at Oxford's Kassam Stadium.

Under EU case law sports governing bodies can draw up "purely sporting rules" even if they clash with normal competition laws, according to a copy of the panel's ruling seen by Out-Law.com. London Welsh had argued that the RFU's rules on primacy of tenure were primarily drafted in order that commercial deals with broadcasters could be met.

The RFU had counter-claimed that the primacy of tenure rule was "essential" for "maintaining and increasing the health and popularity of the sport of rugby in England" and that it was therefore a "justified sporting rule." It had also claimed that the competition-restricting rule was justified in the public interest.

The appeals panel said that the rule was "partly commercial" and "also a sporting rule". This was because ensuring clubs' primacy of tenure helped fixtures to be organised and helped benefit the sport and its fans in general. It also helped ensure that commercial broadcasting contracts were maximised, which in itself could "benefit the game".

However, whilst the RFU was entitled to a "substantial margin of appreciation" in administering such a rule, it had "exceeded" those margins when applying the rule to London Welsh, the appeals panel had said. The panel said that rejecting London Welsh's promotion on the basis of the primacy of tenure rule had given "rise to an unjustified restriction of competition, disproportionate to the objectives it was set to serve."

Although the PRL and RFU planned to relax rules around primacy of tenure from 2013 it could have done so sooner "without imperilling either the fixture list or the value of ... broadcasting contracts," the appeals panel had said.

London Welsh had also relied on other potential instances where the rule had not been strictly enforced to support their case. The panel said that the RFU had placed unjustified restrictions on London Welsh's promotion because there would have been "no difficulty" had a fifth club required to have been also accommodated within the top-flight had they not met the primacy of tenure requirements last season also.

Watkins said that although the ruling did show that sports governing bodies are given certain "leeway" to draft their own rules, the reasons behind such rules must be justifiable as purely sporting in nature or they risk "grating" with competition law and would then need to justify why that conflict should be overcome in sports favour.

"While sport should be left to govern itself, it must do so with fairness, responsibility and transparency in mind," Watkins said. "There must be checks and balances in place to ensure that the rules systems are balanced. If they could normally be seen as being anti-competitive then to avoid a successful challenge they should not be disproportianate to or impose too onerous a burden to justify their existence when considered against the aims being sought."

"The RFU will now be reviewing its minimum standards criteria for participation. They have already committed to that process and will have to establish that any competition-restricting rules are justifiable. The mechanism must not be disproportionate to the aims," he added.

Watkins said that because the primacy of tenure rules in football are "absolute in nature", it was unlikely that at this time the football authorities would be similarly successfully challenged by clubs if they denied promotion for failure to meet the requirements. Watkins added, "that may, however, change as clubs look again at cost savings, investment priorities and the best use of facilities."

The appeals panel's decision does, though, fit with the likely trend of clubs from different pursuits seeking to share facilities, he said.

"What this decision does is reflect the economic reality of life in Britain within the context of sport," Watkins said. "It makes more sense for investment to be made in multi-purpose stadiums that can be used by teams of different sports than for two or three different stadiums to be built for individual purposes."

"The decision by the appeals panel reflects this reality because there is likely to be a greater move towards ground sharing in due course," said Watkins. "If that process accelerates then other sports bodies will need to grapple with what holds a greater priority - investment and stability promoted through shared grounds coupled with potential marginal increase in fixture scheduling, or an absolute adherence to primacy of tenure that may prevent such improvement for clubs."